Terraform Labs and co-founder Do Kwon are challenging the SEC’s demand for a $5.3 billion fine. In a recent filing with the U.S. District Court for the Southern District of New York, Terraform’s lawyers suggested a lower penalty of $1 million, claiming that the larger amount is too high and unjustified.
The SEC’s action follows a New York jury’s verdict, which found that Terraform and Kwon had misled investors with their sales statements for digital currencies TerraUSD (UST), Luna, or wLUNA.
This ruling supports the SEC’s motion for the recovery of illegal proceeds and additional penalties totaling $5.3 billion. It also wants the court to bar Kwon from holding any executive or director’s position at a company issuing securities, with the requirement of detailed disclosure regarding financial assets.
Attorneys for TerraForm, however, insist that Luna Foundation Guard would supply any settlement payout money and is not a defendant in this lawsuit. They argue that since LFG is not a party to this action, the fine in excess of $1 million is hugely disproportionate; therefore, an amount of $1 million is just fine as a reduced penalty.
The background of all this legal wrangling is the dramatic crash of UST in May 2022, which wiped out more than $50 billion in value, adding further complexity to Terraform’s and its stakeholders’ financial landscape.
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